For the past three years at Qdigitizing.com week three\u00a0 has been the slowest week for order volume for the entire year. \u00a0We have to see how the rest of the year plays out but week three 2012 is already slower than weeks one and two.\u00a0\u00a0 And if the trend continues next week will be busier than last.\u00a0 Based on this information it is also safe for me to make an educated guess that next year week three will also be slow.\u00a0 Will it be the slowest week of the year?\u00a0 Maybe, Maybe not; but I am confident it will be slow.\u00a0 Planning for that and why it is important from a production standpoint is a matter of forecasting which is what this blog is about.<\/p>\n
The most important thing to understand about forecasting is that any single event does not begin or end a trend.\u00a0 Even a major catastrophe will only be the epicenter of an event, not the totality of\u00a0the event.\u00a0 You can look to any event, for example: the fiscal crisis of September, 2008 in USA. \u00a0While it might seem like the financial world collapsed in a matter of a week in reality it had been building for a very long time and a catalyst tipped the scales.\u00a0 There is always a buildup to any event.\u00a0 For that reason it is important to pay attention to long term empirical data and make your plans and decisions based on that analysis.\u00a0 Avoid making snap decisions in reaction to peaks or valleys in your key metrics.\u00a0 You are in it for the long haul.\u00a0 Not everyone crashed in September, 2008 and even in the excruciatingly tough economy that has followed many businesses have managed to thrive.\u00a0<\/p>\n
For instance, it would be unwise for me to make long term staffing decisions based on last week\u2019s order volume. \u00a0A careful review of more comprehensive records indicates order volume will remain slow for a few more weeks and start to ramp up as we enter spring.\u00a0 For this reason now\u00a0might be\u00a0a good time to offer\u00a0vacation time\u00a0to key team members or take advantage of a less hectic pace to provide additional trainning for staff.\u00a0<\/p>\n
Accurate forecasting is like having a crystal ball to peer in to the future.\u00a0 I can tell you with reasonable confidence what the busiest period of the year will be at Qdigitizing.\u00a0 You should be able to do the same for your business and it should not be a guess. \u00a0You should be able to back your intuition with facts.\u00a0 \u00a0The most important reason\u00a0is the ability to plan for having the right amount of staff available to handle the business volume at any given time.<\/p>\n
Order Volume (velocity) forecasting is far more difficult for a new business than an established business because you have no history on which to base your numbers.\u00a0 To that end all you can do is \u201ccapacity plan\u201d to your staff and equipment level and do all you can to maximize your marketing efforts allowing you to fill those machines.\u00a0 For example, if you own one 6 head embroidery machine and your staff consists of you and two employees you need to figure out how many embroidered units you can (realistically) get out the door in a week and plan accordingly.\u00a0 If you aren’t filling the machines step up your marketing.\u00a0 Do not reduce your marketing efforts to save money.\u00a0 That is cutting off your nose to spite your face.\u00a0<\/p>\n
For established business (3 years or more of accurate records to order volume) it is relatively easy to forecasts for a coming year assuming you set realistic sales growth goals.\u00a0 Let\u2019s say for the past three years your shop has embroidered the following number of units during week three of your fiscal year:<\/p>\n
2009 = 1,100 units
\n2010 = 1,210 units
\n2011 = 1,331 units<\/p>\n
A close examination will show you this is 10% year over year growth.\u00a0 Unless there is an outside factor telling you something different it is safe to assume in 2012 your week three unit count will be in the range of 1,464 units.\u00a0 \u00a0A simple spread sheet can extend this formula for an entire year (or longer) and will\u00a0lend more credibility to the numbers.\u00a0 This example is meant only as a very specific (and simple) snapshot for one period of time.<\/p>\n
However, what you do with the information forecasting\u00a0provides you is an entirely different conversation.\u00a0 In our simple example the year over year growth might not be critically important (from a production standpoint) but the long term growth between 2008 and 2012 is.\u00a0 If you have not planned accordingly you will not be able to handle a 40% increase in order volume.\u00a0 In this example if you changed nothing in your operation from 2008 to 2012 I can assure you your shop will not be running efficiently.<\/p>\n
Business owners or managers who do not understand forecasting are slaves to intuition.\u00a0 Some might argue forecasting is nothing more than \u201cfancy\u201d intuition. \u00a0I understand why someone might make that argument.\u00a0 I would counter with the simple fact that all companies generating significant revenue forecast their sales so they can effectively plan for sustained growth. \u00a0That is the reason for forecasting.<\/p>\n
While this is a simplified and brief exposure to forecasting it is my hope it will whet your appetite to look more closely at forecasting models for your business.\u00a0 As a consultant I have been in hundreds of embroidery shops over the years and I am always astonished when a production manager cannot show me their order velocity for any given period of time.\u00a0 If you have employees labor is your single most important controllable expense.\u00a0 As a manager the most powerful tool at your fingertips is\u00a0vigilant forecasting based on accurate, historical data combined with a careful review of the current business climate and your organizations marketing efforts.<\/p>\n
Next month I will outline how you can best determine your embroidery shops (or screen printing) production capacity based on your equipment Utilization.\u00a0 \u00a0Utilization combined with forecasting will allow you to accurately plan the most efficient use of your staff and potentially save you organization thousands of dollars over the course of a year.\u00a0<\/p>\n